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‘Holy grail’ of taxing land owners who profit from ‘stroke of a pen’ proves elusive

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“Conceptually it’s ideal. In practice, it’s much harder to distil and involves every level of government working together.”

A group representing eight councils in western Sydney has called for a review of public policy which, it argues, allows disproportionate private gains to be made from publicly funded works.

“We have already seen examples of enormous private windfalls from the land acquisition processes at Badgerys Creek,” Western Sydney Regional Organisation of Councils president Barry Calvert said.

“The potential profits from land rezonings in the growth areas of western Sydney will be staggering. Both federal and state governments must act to promptly facilitate taxpayer investment in key developments from funding provided via value-capture mechanisms.”

Federal Liberal MP John Alexander has championed a value-capture mechanism aimed at giving taxpayers a fair slice of major rises in land values as a result of government-funded projects.

Asked whether value capture should have been introduced earlier, Mr Stokes said there had been “massive missed opportunities going back to the 1970s”.

Planning and Public Spaces Minister Rob Stokes.

Planning and Public Spaces Minister Rob Stokes.Credit:Jessica Hromas

He said “these things are very, very difficult” and NSW Treasurer Dominic Perrottet was taking steps with a plan to abolish stamp duty in favour of a broad-based land tax.

“We have gotten very good, over time, at designing taxation over goods and services and income but the political hot potato has always been land. That’s where the windfalls have always been and that’s why it’s politically the most challenging area to take on,” Mr Stokes said.

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He said one of his frustrations was that the market was able to judge where rezonings were likely to happen because strategic planning had improved over the years. “The problem with that, of course, is that the values have already been captured before the rezoning actually occurs. The better we get at planning, the earlier and earlier the value capture mechanism needs to be,” he said.

A British rail expert last year urged governments to establish a levy before preferred sites of train stations and other infrastructure were announced, because doing so afterwards was too late.

In the ACT, a betterment tax is levied at 75 per cent of the uplift in land value.

NSW Greens MP Jamie Parker said a betterment tax ensured that increases in land values resulting from a “stroke of a pen” by governments were not captured entirely by private interests.

“In NSW, we see hundreds of millions of windfall profits for no productive reason, just because the government has rezoned or the council has rezoned. The government needs to be capturing that for the community to fund these really important infrastructure priorities,” he said.

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